Is it appropriate to conduct a review of the benefit scheme without reviewing the price regulation at the same time?

The Dental and Pharmaceutical Benefits Agency (Sw. Tandvårds- och läkemedelsförmånsverket, hereafter “TLV”) recently issued a final report about prescription drugs outside the pharmaceutical benefit scheme. The report investigated the increase of the number of prescription drugs withdrawn from the benefit scheme and a trend in which pharmaceutical companies are choosing not to apply for entry.

Referral bodies have just submitted their comments. They express criticism that the TLV’s remit was limited to reviewing the benefit scheme and did not include price regulation. Many indications suggest that the TLV’s proposal to subject drugs outside the benefit scheme to substitution will not have the intended effect of pharmaceutical companies keeping their drugs in the benefit scheme. The proposals therefore risk having no merits in relation to the purpose of the remit.

The discussion about pharmaceutical companies withdrawing prescription drugs from the benefit scheme and choosing not to apply for entry has been pursued for some time. As a result, the government tasked the TLV with investigating the consequences of such actions, the reasons for these trends, and to propose measures for counteracting the negative consequences for patients and the healthcare system.

However, the TLV’s remit did not include a review of price regulation. TLV’s final report, which was published before the summer, presents proposals that include allowing substitution of drugs not covered by the benefits scheme at the pharmacy and implementing an independent website where prices for all prescription drugs can be compared.

The purpose of the Swedish benefit scheme is to safeguard high drug costs. There is an inherent desire to have as many prescription drugs covered by the benefit scheme as possible.

Today the scheme covers almost 14,000 different types of medications and other goods. The TLV decides what products may be included and at what price. Not all prescription drugs are covered.

Medicinal products which are not included are subject to free determination of price, which means that the price may vary from one pharmacy to another. Under the current system, pharmacies may not substitute less expensive drugs that are covered by the benefit scheme for drugs that are not covered by the scheme.

What then is the reason that a drug is not covered by the benefit scheme? One frequent argument is that pharmaceutical companies choose to withdraw drugs from the scheme to avoid competition from generics. Of course withdrawal may also be due to other factors, such as rejection by the TLV because the cost is too high, the drug can only treat less serious medical conditions, or the TLV may refuse a request for a price increase.

In the discussion, responsibility for withdrawal is often placed on the pharmaceutical companies. However, for the pharmaceutical companies, the issue is more complex, largely due to inadequate interaction between the benefit scheme and pricing policy.

Companies (regardless of industry) always seek to compensate their costs for their products. If the benefit scheme does not allow pharmaceutical companies to cover the cost of their products, companies may request withdrawal from the scheme. One example of drugs for which the complex problem has now become more pronounced involves drugs covered by the scheme that are more than 15 years old. Under a recently introduced requirement, the prices of these drugs must be reduced by 7.5 percent, which affects the possibility of keeping them within the benefit scheme.

Against this background, it is questionable whether it really is appropriate to conduct a review of the benfit scheme without also reviewing price regulation at the same time. Various industry representatives have repeatedly argued this point and several referral authorities have also criticized this point.

There are many indications that TLV’s proposals, such as substitution, will not influence decisions by companies to withdraw unprofitable products from the benefit scheme. There is also a risk that the long-term effect of the proposals may be that drugs that are not covered by the benefit scheme will instead disappear from the market. The proposals therefore risk having no effect in relation to the purpose of the remit.